Do I include sales tax and fees in the original cost of a car I bought using my old as a trade in? Do I subtract the trade in value?

[rkgarner]

Original cost $12,544

Trade in $5995

Is the original cost $12,544 or do I deduct the trade in value and do I include sales tax and other fees?

[DS30 · Accepted solution]

Yes you include all costs necessary to acquire the car (this would include any sales taxes or fees) in the basis of your new car. You then decrease the basis in the new car by the value of the trade-in. So the ending basis in your car is the original cost (including sales tax and fees) less the value of your trade-in.

[happyme]

What if the old car had negative equity and u had to add that to new vehicle